Many would say that any political power of global corporations is a myth. Companies might like to think that they wield political power but the reality is quite different. The basic problem is that governments set the rules – a bit like for sovereign risk. Governments can determine the regulatory backdrop, the financial framework and the legal system. Hence it is not the corporate but the government that determines the scope for profit making. So corporations are rule-takers not rule-makers. In contrast, corporations are governed by shareholders and their interests. And those interests are basically maximising profits and shareholder returns within their self-imposed strategies and values. The extent to which they care about wider interests is debatable.

However, governments do not hold all the cards. Corporates can determine their employment needs, their selling prices, investment strategies and product designs. Thereby, corporates can guide consumers’ tastes and behaviours. They also create the demand for infrastructure by their location decisions. This said, governments can and do influence the business environment. They set the tax regime, determine what tariffs are applicable (by means of the trade deals they negotiate) and the standards to which products are required to be designed. More fundamentally, governments also create available skill levels by funding their choice of the most appropriate education system. And, of course, they have control within their jurisdiction of the penalties for any breaches of the rules they set. So actually, for most corporates, political influence is limited to lobbying power on their key areas of interest, rather than actual influence on overall policy direction.

But for some corporates, that is different. John Mikler posits that globalisation means that global corporates are in charge. For sure, there are now more of them – from 7,000 in 1970, there are now more than 100,000, with another 900,000 ‘foreign affiliates’ who operate beyond national borders. Clearly, the way the world economy has evolved in recent decades does mean that the corporate world is more inter-connected – through global supply chains as well as via globalised generic products like smart phones. And the upshot of that is a weakening of national sovereignty. Global corporates can choose their home domicile to minimize their tax liability or maximize their regulatory influence or selling power. Products have become more global while tax and regulation requirements are more local and perhaps more complex – and thus more easily (legally) avoidable.          

Mikler has some great statistics – the FT Global 500 are responsible for 80% of the world’s FDI stock, 70% of world trade and 30% of world GDP. Just 10 states account for the headquarters of 84% of these corporates, of which the US accounts for half. The BRICs may be growing in influence but the old-timers still hold the balance of power because they are the domicile of the major global corporations.

Yet even this is not straightforward. The US may dominate the global corporate landscape but the reality is that the average UNCTAD Trans-nationality Index (TNI) – foreign: total assets; foreign: total sales and foreign: total employment – averages just 60 out of 100. However, Wal-Mart – who many see as the world’s emblematic global corporation – has a TNI of just 36. By contrast, UK global corporates have a TNI of 71 on average – perhaps a reflection of the UK’s more global perspective.

In succeeding chapters, Mikler describes the theories of global corporates’ power: states versus markets; globalists, sceptics or transformationalists; whatever. It seems that 10% of the world corporates generate 80% of all global profits and the largest of them – firms with $1b plus of annual revenue – account for 60% of global revenues and 65% of global market capitalisation. So to some extent, the power of global corporates rests just on the fact that they are big.

Geographically, there have been some changes with regard to who is biggest. From 2006 when it did not feature, by 2015, China was second to the US in headquartering most global corporates. Yet its players have even lower TNIs than Wal-Mart, recording a mere third of the global average. Average sales and employment of Chinese corporates are above average but assets far lower – in contrast to the UK which is above average by assets, TNI, sales and employment. Global finance is of course dominated by the UK and the US, which perhaps means that the TNIs overstate corporate trans-nationality for those countries, and mergers and acquisitions are also predominantly led by the US or the UK.  FDI is also US-led, though China is increasingly important as a source and a destination of FDI – as might be expected – the theme of the chapter really: US still dominates but China is chasing it. And corporates are still inherently national and tend to be based in the world’s most powerful countries so their global reach beyond is akin to colonisation.

Chapter 4 is fascinating in that it explores the relationships of corporates to the state. While China’s corporates are led by the state, the opposite is true in the US and the UK, characterized as liberal market economies (LMEs). Much of Europe is a more state-led system – a coordinated market economy (CME) - German style - or a social democracy (Scandinavia). These distinctions are important determinants of how product, financial, and labour markets operate and how national institutions evolve. Global corporates reflect their national systems and, as they internationalise, they bring these national values to bear on other systems so that gradually the CME model is becoming more like that of the LMEs – less regulated. However, China’s increasing influence means that its state-led model is gaining ground and over time, may reverse that trend.

Mikler asserts in his final chapter that “global corporations’ political power flows from their market control and geographical concentration.” Their institutional embedding in their home state is the basis for the power they wield abroad. Thereby they influence political debate by claiming that their authority is based on their legitimacy – like Microsoft’s operating system, now universally accepted as the global norm. Similar examples are marine standards or the UK’s commercial code that evolved out of merchant trading practices. Cartels (like Visa or MasterCard) can bring misuse of the market system, while industry groupings can also distort. But adverse publicity – a reputational risk - is a major constraint on market abuse. Apple’s exploitation of workers in China forced an outcry at its modus operandi. Likewise, Shell’s Brent Spar episode in 1995 forced it to become more environmentally aware in order to restore its reputation. Thus corporate and social responsibility (CSR) has become an important market regulator. Failure to be seen to adhere to CSR values has the same impact as failure to pay taxes or support local communities. This is not to say that CSR forces corporates to pursue the common good. Indeed, many would say that CSR adds to their legitimacy and so allows them to better further their own interests.

Mikler concludes that global corporations control rather than compete in markets. He sees them as national in identity and regional in operation, but global in interests. So for them, the free market is not relevant to understanding them. Equally, as political actors they are national or multinational, but not global. So it is their home states that are responsible for modifying or controlling their global power. And from these conclusions new trends are merging. Unfettered free markets are no longer desirable, rather inclusive capitalism is the latest catchphrase. But the global financial crisis has illustrated that national governments look after their national interests first – and in so doing shore up their own power. Yet global corporates are constrained, by their CSR aims and by their own values. This is a welcome limiting influence, but one not impacting all equally. For instance, Shell faced public opprobrium and business loss over Brent Spar while Apple products continue to sell well despite their continuing exploitative labour practices or their aggressive tax avoidance – Starbucks, by contrast, was boycotted for the latter. This may just be a reflection of Apple’s product dominance – after all, there are alternatives to buying from Shell or Starbucks. Or it may illustrate the overwhelming power of Apple as a global corporate.

Mikler concludes global corporates derive their power from their home bases. And economically powerful states are empowered through their global corporates. So the two are entangled in a complex mix that needs further analysis. That seems true, but to me, there are further distinctions required. Apple is unusual as a global player because of its market dominance. In sectors where there are a number of large players – finance, mining or retail, say – there is more competition to offset the ability of any one entity to control the market and exercise political power. Nonetheless, as the world economy becomes more interconnected, the issue of corporate power can only attract more interest. And this readable book is a worthy addition to the literature.